Contract Disputes Guide

A contract dispute occurs when parties involved in a contractual agreement disagree on the interpretation, performance, or enforcement of the contract terms.

Issues can range from simple disagreements over payment terms to complex disputes involving breach of contract or failure to deliver goods or services as specified. 

Common causes include

• misunderstandings of contractual obligations,
• changes in circumstances, or
• disputes over contract termination.

It is vital to resolve a contract dispute quickly for the following reasons

• timely resolution of contract disputes is essential to mitigate financial losses and preserve business relationships.
• efficient resolution minimises the risk of prolonged litigation, which can be costly and time-consuming.
• resolving disputes promptly helps maintain trust and credibility with clients, suppliers, and business partners.
• contract disputes can take up considerable management time and divert attention from the running of a business.
• contract disputes can also badly affect cashflow in a business, especially if the monies due are considerable.

This guide offers a comprehensive approach to understanding and managing contract disputes effectively.

It covers fundamental aspects such as contract formation, types of disputes, legal frameworks, strategies for resolution, and proactive measures to prevent future disputes.

Whether you’re navigating a current dispute or seeking preventive measures, this guide provides practical insights and strategies tailored to business needs.

In everyday business transactions, contracts serve as essential tools to define the rights and obligations of parties involved. Understanding how contracts are formed is fundamental to navigating business relationships effectively and also why disputes might arise.

Contracts are legally binding agreements between two or more parties that establish rights and obligations. They can be formed through various means, including verbal discussions, written agreements, or implied conduct. The process typically involves the following key elements.

• Offer. An offer is a proposal made by one party (the offeror) to another (the offeree) indicating a willingness to enter into a contract under specific terms. It must be clear, definite, and communicated to the offeree with the intention to create legal relations.
• Acceptance. Acceptance occurs when the offeree agrees to the terms of the offer without modification. It creates a mutual agreement, also known as a meeting of the minds, between the parties. Acceptance can be communicated verbally, in writing, or through conduct that indicates agreement.
• Consideration. Consideration the term used in English law for something of value exchanged between the parties to a contract, typically money, goods, or services. It ensures that each party receives a benefit or suffers a detriment as a result of entering into the contract. Without consideration, a contract may be deemed unenforceable.
• Intention to create legal relations. Contracts are only enforceable if the parties intended to create legal obligations. Business agreements are generally presumed to have this intention unless explicitly stated otherwise.

Contracts can be either written or verbal, depending on the nature of the agreement and the preferences of the parties involved. While verbal agreements are legally binding in many cases, written contracts offer several advantages.

• Clarity. Written contracts provide a clear record of the terms agreed upon, reducing the likelihood of misunderstandings or disputes.
• Enforceability. Written contracts are typically easier to enforce in court, as they provide tangible evidence of the parties’ intentions and obligations.
• Complexity. For complex transactions or agreements involving significant sums of money, goods, or services, written contracts are often recommended to ensure all terms are adequately documented and understood.

Clear and precise contract terms are essential to avoid ambiguity and ensure all parties understand their rights and obligations. Key considerations include.

• Definitions. Define key terms and concepts used throughout the contract to prevent misunderstandings.

• Conditions and obligations. Clearly outline the conditions under which each party’s obligations must be fulfilled, including timelines, performance standards, and consequences for non-compliance.
• Dispute resolution. Include provisions for resolving disputes, such as mediation or arbitration, to provide a framework for resolving disagreements without resorting to litigation.
• Payment terms. Specify the terms under which payments are due, including amounts, due dates, and any applicable penalties for late payments.
• Delivery terms. Define when and how goods or services will be delivered, including conditions for acceptance, transportation responsibilities, and risk of loss.
• Termination clauses. Outline circumstances under which the contract can be terminated, such as breach of terms, failure to perform, or change in circumstances.
• Force majeure: Include provisions for unforeseen events or circumstances beyond the control of the parties that may affect contract performance.
• Confidentiality. Address obligations related to the protection and use of confidential information exchanged during the contract term.
• Governing law. Indicate the jurisdiction whose laws will govern the interpretation and enforcement of the contract terms, particularly important in international agreements.
• Amendment and variation. Define procedures for making changes or amendments to the contract, ensuring clarity on how modifications can be implemented.

Including these additional terms will enhance the clarity and comprehensiveness of the contract, reducing the risk of misunderstandings and disputes.

There are a range of different reasons why a contract dispute might arise. Our team has dealt with all of these over the years and the list below are just some of the issues we resolve for our clients.

1. Issues from contract review.

Contract review disputes typically stem from disagreements over the interpretation of contract terms and conditions. These disputes often involve ambiguities or inconsistencies within the contract language, leading to differing understandings between parties.

2. Disagreements over offers.

Disputes related to offers arise when one party claims an offer was made, while the other party denies its existence or challenges its validity. Such disputes hinge on whether an offer was clearly communicated, whether it was intended to be legally binding, and if all necessary terms were specified.

3. Misunderstandings of technical terms.

Technical terms within contracts can lead to disputes when parties interpret them differently or fail to understand their precise legal implications. These disputes often require clarification or expert interpretation to align parties’ understandings with legal standards.

4. Breach of warranty claims.

Disputes arising from breach of warranty involve one party failing to fulfil specific promises or assurances made within the contract.

5. Misrepresentation claims.

Misrepresentation disputes occur when one party makes false statements or representations, whether innocently, negligently, or fraudulently, inducing the other party to enter into the contract. These disputes focus on the impact of misrepresented information on the contract’s validity and enforceability.

6. Retention of Title disputes.

These disputes involve ownership rights over goods supplied under a contract until full payment is made. Disputes may arise if the buyer fails to pay or becomes insolvent before completing payment, leading to questions of ownership and rights of recovery.

7. Indemnity disputes.

Indemnity disputes arise when one party seeks indemnification for losses, liabilities, or damages incurred due to specific events or breaches outlined in the contract. These disputes involve evaluating the scope of indemnity obligations and the extent of financial responsibility between parties.

8. Professional negligence.

Contract disputes related to professional negligence occur when a professional fails to perform services or obligations with the skill and care expected within their profession. These disputes often involve claims of substandard performance, breach of professional duties, or failure to meet contractual obligations.

9. Joint venture disputes.

Disputes in joint ventures involve disagreements over partnership terms, profit sharing, decision-making authority, or breach of joint venture agreements. These disputes may also arise from conflicting business goals, management issues, or disputes over contributions and responsibilities.

10. Non-performance or partial performance.

Disputes arise when one party fails to perform contractual obligations fully or partially. These disputes require assessment of whether non-performance constitutes a material breach and its impact on the contract’s enforceability.

11. Rights to terminate a contract.

Disputes over termination rights involve parties asserting their legal rights to end a contract due to specific conditions, breaches, or changes in circumstances outlined in the contract terms. These disputes often hinge on the interpretation of termination clauses and compliance with notice requirements.

12. Breach of sale and Supply of Goods and Services Agreements.

Disputes related to the sale and supply of goods or services involve allegations of non-delivery, defective products or services, late delivery, or disputes over payment terms. These disputes require assessment of contractual obligations, performance standards, and remedies available under relevant laws.

13. Agency, Distribution, and Franchise Agreement related disputes.

Disputes in agency, distribution, and franchise agreements involve disagreements over territory rights, exclusivity clauses, termination, or breach of contract terms. These disputes often require consideration of agency law, distribution agreements, and franchise rights under applicable legal frameworks.

14. Exclusion and limitation clauses.

Disputes over exclusion and limitation clauses involve challenges to clauses that seek to exclude or limit liability for specific events or breaches. These disputes require evaluation of the validity, fairness, and enforceability of such clauses under contract law principles.

15 Cross-border disputes.

Cross-border disputes arise when contractual parties operate in different jurisdictions, leading to conflicts over applicable laws, jurisdictional issues, enforcement of judgments, and international treaties governing contracts. These disputes require expertise in international law, conflict of laws, and dispute resolution mechanisms.

Contracts are essential for defining business relationships and expectations, but disputes can arise unexpectedly. Recognising the signs of a contract dispute early can be crucial in managing and resolving issues efficiently.

Communication breakdown

A significant indicator of a contract dispute is persistent misunderstandings or breakdowns in communication regarding contract terms and obligations. This breakdown can occur due to

• ambiguities in contract language,
• differing interpretations of clauses, or
• changes in expectations over time.

FWJ tip – Clear and regular communication between parties is essential to prevent and address misunderstandings promptly.

Failure to meet deadlines

Delays or the outright failure of one party to meet agreed-upon deadlines or deliverables stipulated in the contract can signal a potential dispute.

This breach of deadlines may lead to

• frustration,
• financial loss, or
• cascading effects on other business operations.

FWJ tip – Prompt communication and renegotiation of timelines may mitigate the impact of missed deadlines.

Payment issues

Disputes over invoicing, delayed payments, or disagreements regarding the scope or timing of payments owed under the contract can indicate underlying contract disputes.

These issues may stem from

• disagreements over deliverables,
• quality concerns, or
• changes in project scope.

FWJ tip – Clear billing practices, periodic reconciliation of accounts, and open dialogue can help prevent and address payment-related disputes.

Quality or performance concerns

Allegations of inadequate quality, substandard performance, or failure to deliver goods or services as promised in the contract are common triggers for disputes.

Issues may arise due to

• differing expectations,
• changes in market conditions, or
• unforeseen challenges in execution.

FWJ tip – Proactive monitoring of performance metrics, regular status updates, and clear escalation procedures can help mitigate these concerns and prevent escalation into a full-blown dispute.

Breach allegations

Accusations from either party claiming that the other has breached specific terms or conditions of the contract can escalate into disputes.

Breaches may involve

• failure to deliver on contractual obligations,
• non-compliance with quality standards, or
• breaches of confidentiality or non-compete clauses.

FWJ tip – Clear documentation of obligations, regular performance evaluations, and prompt communication of concerns are essential in addressing and resolving breach allegations.

Disagreements on terms

Persistent arguments or misunderstandings over contract terms, conditions, or interpretations can indicate potential disputes.

Disagreements may arise due to

• ambiguities in contract language,
• differing business practices, or
• changes in external factors impacting contractual obligations.

FWJ tip – Regular contract reviews, clarification of ambiguous terms, and negotiation of mutually acceptable solutions can help prevent disagreements from escalating into disputes.

Legal letters or threats

Receipt of letters before action, or threats of litigation from the other party is an obvious sign of a serious contract dispute.

Legal actions may be pursued to

• enforce contractual rights,
• seek damages for breach of contract, or
• compel performance of obligations.

FWJ tip – Early engagement of our team of contract experts is highly recommended to help diffuse the situation and undertake a proper review of the claims, and explore how best to resolve the situation without full legal proceedings being issued.

Escalating tensions

Deteriorating relations or escalating tensions between parties involved in a contract can be indicative of underlying disputes.

Tensions may arise from

• perceived breaches of trust,
• unmet expectations, or
• disputes over contractual performance.

FWJ tip – Open communication, clarification of expectations, and mediation efforts can help de-escalate tensions and foster a collaborative approach to resolving disputes.

Recognising these signs early and taking proactive steps to address contract disputes can help businesses mitigate risks, preserve relationships, and safeguard their interests.

Understanding the legal framework surrounding contract disputes is crucial for effectively navigating and resolving conflicts. This section outlines key legislation relevant to contract disputes and provides explanations of essential legal terms.

English law provides a robust framework through various statutes that govern contract disputes. Familiarity with these laws is essential for businesses to understand their rights, obligations, and remedies in contractual relationships. Key legislation includes:

Sale of Goods Act 1979

The Sale of Goods Act 1979 governs the sale and purchase of goods in the UK. It outlines the statutory rights and obligations of both buyers and sellers in transactions involving tangible, movable goods. Key provisions include:

• Quality and fitness. Goods must be of satisfactory quality, fit for purpose, and match any description given.
• Title and ownership. The seller must have the right to sell the goods, and ownership transfers to the buyer upon payment.
• Remedies for breach: The Act provides remedies such as repair, replacement, or refund for breaches of statutory rights.

Unfair Contract Terms Act 1977

The Unfair Contract Terms Act 1977 aims to protect consumers and businesses from unfair terms in contracts that create a significant imbalance in rights and obligations. It covers:

• Exclusion clauses. Terms that seek to limit liability must be reasonable and fair.
• Unfair terms. Provisions that exclude or restrict liability in a way that is not reasonable under the circumstances are void.
• Business-to-Business contracts. The Act also applies to contracts between businesses, particularly in cases where one party has greater bargaining power.

Supply of Goods and Services Act 1982

The Supply of Goods and Services Act 1982 applies to contracts for the supply of goods and services and establishes statutory rights and obligations. Key provisions include:

• Satisfactory quality. Goods must be of satisfactory quality and fit for their intended purpose.
• Fitness for purpose. Goods supplied must be fit for any specific purpose made known to the supplier.
• Service provision. Services must be carried out with reasonable care and skill.

Late Payment of Commercial Debts Regulations 1998

The Late Payment of Commercial Debt Regulations 1998 combat late payment in commercial transactions. Key aspects include:

• Interest on late payment. Creditors are entitled to claim interest at a statutory rate above the Bank of England base rate on overdue payments.
• Compensation. Creditors can claim compensation per invoice at £40, £70 or £100 depending on its value.
• Debt Recovery Costs: Creditors can claim reasonable costs for recovering a debt, including debt recovery agency fees and legal costs.

Contract law involves specific terminology that defines rights, responsibilities, and legal concepts relevant to contractual relationships. Understanding these terms is crucial for interpreting contract terms and resolving disputes effectively. Key terms include:

Breach of Contract. Occurs when one party fails to fulfil their contractual obligations, giving rise to legal remedies for the aggrieved party.

Capacity. The legal ability of parties to enter into a contract, typically referring to age, mental competence, and legal status.

Consideration. Something of value exchanged between parties to a contract, often monetary, goods, or services, forming the basis for the contract’s enforceability.

Counteroffer. A response to an initial offer that alters its terms and acts as a rejection of the original offer.

Estoppel. Preventing a party from asserting a legal right due to conduct, actions, or representations that contradict prior claims or commitments.

Force majeure. A clause that excuses parties from fulfilling contractual obligations due to unforeseen circumstances beyond their control, such as natural disasters or government actions.

Implied terms. Terms in a contract that are not expressly stated but are inferred by law, custom, or previous dealings between the parties.

Liquidated damages. Predetermined compensation for specific breaches of contract agreed upon by parties in advance, intended to provide certainty in damages calculation.

Offer and acceptance. Essential elements of contract formation where one party proposes terms (offer) and the other party agrees to those terms (acceptance), forming a binding agreement.

Remedies. Legal actions or relief available to parties in response to a breach of contract, including damages, specific performance, or injunctions.

Termination clause. Specifies conditions under which parties may terminate the contract, outlining rights and obligations upon termination.

Void and voidable contracts. Distinctions between contracts that are entirely unenforceable (void) and those that may be cancelled at the option of one party (voidable).

A breach of contract refers to a situation where one party fails to perform its obligations as outlined in the contract. This failure can involve not delivering goods or services as promised, not meeting deadlines, providing substandard work, or any other violation of the agreed-upon terms.

The main types of breach of contract are set out below

1. Material breach.

A material breach is a significant violation of the contract that goes to the core or essence of the agreement.

• It typically deprives the innocent party of the substantial benefit they expected from the contract.
• In legal terms, a material breach allows the innocent party to claim damages and, in some cases, terminate the contract and seek additional remedies.

Courts assess whether a breach is material based on the impact it has on the overall purpose of the contract and the intentions of the parties at the time of formation.

2. Minor breach.

Also known as a partial breach, a minor breach occurs when a party fails to perform some minor aspect of their contractual obligations.

• Unlike a material breach, a minor breach does not go to the heart of the contract and does not prevent the parties from receiving the main benefits they expected.
• In such cases, the innocent party is entitled to claim damages resulting from the breach but is typically not entitled to terminate the contract or withhold performance themselves.

3. Fundamental breach.

A fundamental breach is so severe that it essentially destroys the basis of the contract, depriving the innocent party of the main benefit they anticipated.

• It is often considered tantamount to a repudiation of the contract by the breaching party.
• A fundamental breach gives the innocent party the right to terminate the contract and claim damages for losses suffered as a result of the breach.

Courts analyse whether a breach is fundamental by assessing its impact on the contractual relationship as a whole, including whether the breach undermines the core purpose of the contract.

4. Anticipatory breach.

An anticipatory breach occurs when one party, through words or actions, indicates in advance that they will not fulfil their contractual obligations when the time comes.

• This type of breach can occur before the actual performance is due and can give rise to immediate legal remedies for the innocent party.
• The innocent party may treat the contract as terminated and pursue damages for the anticipated breach, depending on the circumstances and the terms of the contract.

5. Actual breach.

An actual breach is straightforward and occurs when a party fails to perform any obligation required by the contract at the specified time.

• This can include failing to deliver goods or services, not making payments on time, or providing substandard work.
• Upon an actual breach, the innocent party has the right to claim damages resulting from the breach and may also seek specific performance or termination of the contract, depending on the nature of the breach and applicable legal principles.

6. Repudiatory breach.

A repudiatory breach occurs when one party expressly indicates that they do not intend to fulfil their obligations under the contract, or behaves in a manner that makes it impossible for them to fulfil those obligations.

• This type of breach is serious and typically gives the innocent party the right to terminate the contract immediately and claim damages for losses suffered.
• Repudiatory breaches are assessed based on the intention of the breaching party and the effect of their actions or statements on the contractual relationship.

Each type of breach of contract carries specific legal implications and remedies, which may vary depending on the governing law and the terms of the contract itself. Understanding these distinctions is crucial for parties involved in contract disputes to determine their rights and obligations under the law.

The following are the types of breaches our team regularly see and deal with.

1. Non-payment.

Non-payment occurs when one party fails to make the agreed-upon payments under the contract. This is a common issue in both commercial and personal contracts. The aggrieved party can seek legal remedies to recover the owed amount, including interest and legal costs.

2. Breach of confidentiality.

Breach of confidentiality happens when a party discloses information that was agreed to be kept confidential. This can occur in employment contracts, non-disclosure agreements, and other business dealings. Remedies may include injunctions to prevent further disclosure and damages for any losses incurred.

3. Late performance.

Late performance refers to a party failing to perform their contractual obligations within the stipulated time frame. This can cause significant disruptions and financial losses, particularly in time-sensitive agreements. The non-breaching party may seek damages for any losses resulting from the delay.

4. Failure to deliver.

Failure to deliver involves one party not providing the goods or services specified in the contract. This can result in the non-breaching party seeking specific performance (compelling the breaching party to fulfil their obligations) or damages for any losses incurred.

5. Failure to perform.

A general term for when a party does not fulfil their contractual duties, failure to perform can lead to various legal consequences. The non-breaching party may seek remedies such as damages, specific performance, or contract termination.

6. Quality and performance issues.

Quality and performance issues arise when the goods or services provided do not meet the standards specified in the contract. This can include defective products or subpar services. The non-breaching party can seek remedies such as repair, replacement, or compensation for losses.

7. Misrepresentation or fraud.

Misrepresentation occurs when one party makes a false statement that induces the other party to enter into the contract. Fraud involves intentional deception. Both can render the contract voidable, and the non-breaching party may seek rescission (cancellation of the contract) and damages.

8. Repudiation.

Repudiation happens when one party indicates that they will not fulfil their contractual obligations, either through explicit statements or actions. This allows the non-breaching party to terminate the contract and seek damages for any losses incurred.

9. Change in terms.

Unilateral changes in the contract terms by one party can constitute a breach. This can involve altering payment schedules, delivery dates, or other key aspects of the agreement. The non-breaching party may seek to enforce the original terms or claim damages.

10. Wrongful termination.

Wrongful termination occurs when one party terminates the contract without a valid reason or without following the termination procedures outlined in the contract. The non-breaching party may seek reinstatement or damages for any losses incurred.

Proving a breach of contract involves demonstrating the following elements:

1. Existence of a valid contract. There must be a legally binding agreement between the parties, including offer, acceptance, consideration, and intention to create legal relations.
2. Performance by the Claimant. The party bringing the claim (the claimant) must show that they have fulfilled their obligations under the contract or have a valid reason for not doing so.
3. Breach by the Defendant. The claimant must demonstrate that the other party (the defendant) has failed to perform their contractual obligations.
4. Damages. The claimant must show that they have suffered a loss as a result of the breach. This can include financial losses, loss of opportunity, or other measurable damages.

The legal consequences of a breach of contract can vary depending on the severity of the breach and the terms of the contract. Common remedies include:

• Damages. The non-breaching party may be awarded monetary compensation for the losses incurred due to the breach. This can include compensatory damages, consequential damages, and, in some cases, punitive damages.
• Specific performance. In some cases, the court may order the breaching party to fulfil their contractual obligations. This remedy is typically used when monetary damages are insufficient to compensate for the breach.
• Rescission. The contract may be cancelled, and both parties are restored to their positions before the contract was formed. This remedy is often used in cases of misrepresentation or fraud.
• Injunction. The court may issue an injunction to prevent the breaching party from taking certain actions or to compel them to perform specific actions.

The Sale of Goods Act 1979 came into force on 1 January 1980 and applies to all contracts for the sale of goods made on or after 1 January 1894. The Supply of Goods and Services Act 1982 extends the protection available to cover contracts under which goods are transferred other than by sale (for example the hire of goods). These provisions came into force on 4 January 1983.

The Sale of Goods Act 1979 has been amended many times. This guide considers the use of standard terms and conditions together with the key terms which are likely to be implied in a sale and supply of goods contract by the above legislation. This guide will deal primarily with the sale and supply of goods on a business-to-business basis. Where the sale and supply of goods to consumers arises, a different approach will be required. That approach falls outside the scope of this guide.

In business-to-business transactions, the use of standard terms and conditions for the sale or purchase of goods are used routinely. A well drafted set of standard terms and conditions will ensure that favourable terms are in place where a party is selling or buying goods and/or services; they will also standardise the terms used in the business.

• The use of standard terms raises various issues. Foremost, ensuring that the other party accepts the standard terms without amendment or substitution is vital.
• In addition, the contents of the standard terms must comply with both statute (legislation) and common law.

It is important that the standard terms and conditions are brought to the attention of the other contracting party at the earliest possible time. This way you can ensure that they are incorporated as terms of the contract. This means that it is not possible to impose standard terms after a contract has been agreed. For example, printing the standard terms on the rear of an invoice will not meet the legal requirements for incorporation.

Typically, both parties will attempt to incorporate their own standard terms and conditions. When this arises, it can be difficult to identify which standard terms apply. It is often the case that one party will seek to introduce their own standard terms when an offer is sent out.

• Upon receiving this offer, the other party will attempt to incorporate their own standard terms by making a counteroffer.
• The general rule is that the last set of standard terms which are sent out are the prevailing terms.

Often, standard terms and conditions are not sent out in every case particularly where the parties trade together regularly over a period of time. Where this practice occurs the court will imply into the dealings of the parties consistent contractual terms based on any standard terms which may have been incorporated into a contract previously.

The Sale of Goods Act 1979 Act will impose certain implied terms into a contract of sale for the benefit of the party purchasing the goods. One of the most important statutory implied terms and which often gives rise to a dispute is the expectation that the goods purchased will be of “satisfactory quality”.

• The term satisfactory quality includes so-called fitness for purpose, appearance, finish, freedom from minor defects, safety and durability.
• Failure of the product to meet any one of these implied terms will constitute a breach of the contract for sale and will enable the injured party to go back to the vendor for a contractual remedy.

The limitation period for contractual breach is six years from the date of sale. However, the purchaser cannot hold the vendor liable for what is known as fair wear and tear.

The term fit for purpose means that both the “normal” purpose of the goods and any specific purpose that the purchaser agreed with the vendor. For example, the purchaser may have specified in the contract for sale that the component or part is compatible with another component or part.

The term satisfactory quality takes into account all relevant circumstances including fitness for purpose, appearance and finish, freedom from minor defects, safety and durability. What is regarded as satisfactory will depend on the price paid and how the item was described. For example, where the goods are second-hand, the purchaser cannot expect the best quality.

• The requirement for satisfactory quality does not arise where there is fair wear and tear, misuse or accidental damage or if the purchaser simply decides that it no longer wants the goods.
• Typically, a purchaser cannot always expect a legal remedy where goods have faults which they knew about before the sale or which should have been evident on a reasonable inspection.

Another important term implied by the Sale of Goods Act 1979 is that the vendor has good title and has the right to transfer the item sold.

Normally a party purchasing in the course of a business will not be entitled to a full refund under the terms of their contract if the product is only very slightly faulty. However, this will not limit a business’s right to compensation for any loss caused. If the purchaser believes that something is wrong with the goods, they can ask the seller to put things right which may include a refund, repair, or replacement.

All contracts made between businesses are subject to the Unfair Contract Terms Act 1977.

The 1977 Act regulates and restricts the operation and legality of some contractual terms including those excluding or restricting liability.

Primarily, liability can never be excluded or restricted in claims for death or personal injury; it would be unreasonable to do so under the the Unfair Contract Terms Act 1977. In addition, terms which purport to exclude or restrict liability relating to ownership of goods can also be unreasonable. The fact that the purchase has title to the goods is protected by the Unfair Contract Teams Act 1977 .

What constitutes an exclusion clause is not defined in the 1977 Act, but the courts have held  that the following terms are likely to fall within the purview of the 1977 Act:

• Clauses restricting or excluding liability.
• Clauses which make a liability (or the enforcement of a liability) subject to conditions that are restrictive or difficult to carry out.
• Clauses which restrict the rights and remedies of an agreed party.
• Clauses which restrict rules of evidence or procedure.

Any other exclusion clauses will be subject to a test of reasonableness. Those which tend to fall foul of the test for reasonableness include those which form part of a standard contract and were not individually negotiated, or where the purchaser had unequal bargaining power to negotiate better terms.

A term is more likely to be reasonable if:

• It is clear and precise.
• The parties had equal bargaining power when the contract was signed.
• The goods were made or adapted to special order for the customer.
• The customer was given an incentive to accept the specified term.
• The term is commonly used in that type of contractual arrangement.

The principles set out above do not apply exclusively to corporate entitles, they also apply to sole traders, where the sole trader is selling to business entities (but not sales to consumers).

The Sale of Goods and Services Act 1982 implies terms and contracts for the transfer or hire of goods, regarding title, quality or fitness and transfer or hire by description or sample. It also includes implied terms relating to the supply of services.

Under Sections 13-15 of the Sale of Goods and Services Act 1982 various undertakings are implied into relevant contracts for the supply of services. These include the following:

• An implied term that a supplier acting in the course of a business will carry out the service with reasonable care and skill.
• Where a contract for the supply of services fails to fix a time for the service to be carried out there is an implied term that a supplier acting in the course of a business will carry out the service within a reasonable time.
• Where the contract is silent as to payment for the service or leaves it to be determined in a manner agreed by the contract must be determined in the course of dealings between the parties, there is an implied term that the party contracting with the supplier will pay a reasonable charge.

A breach of the aforementioned implied terms gives the receiving party the right to reject the services if they do not meet the statutory standards and to terminate the agreement. However, breach of the implied terms should not be minor – the rejection of services would be unreasonable. Where the breach is minor damages will be adequate remedy.

Terms implied by the Sale of Goods and Services Act

An agency relationship will arise where a “principal” appoints an “agent” to act under its direction for a specific purpose.

Disputes tend to arise because in law the agent is typically endowed with the power and authority to create legal relations on behalf of the principal with third parties. For example, this could include the agent buying or selling goods or services on behalf of the principal or negotiating contracts on the principal’s behalf.

The agent and principal may be individuals, partnership or companies. In each case the resulting contract is made between the end customer and the principal (and not with the agent). In return, the agent will receive payment, usually in the form of a commission, often as a percentage of the agreed price (or services).

An agency relationship is normally entered into on an express basis. This means that both parties consent to their relationship principal and agent. However, on occasion, an agency can be implied from the conduct of the parties and the circumstances of the relationship. 

In an agency relationship the agent will be authorised by the principal for a specified purpose to enter into contracts on the principal’s behalf with third parties. Authority from the principal may be either general or specific, depending upon the terms of the agency contractor. So far as the agent enters into contracts under the principal’s authority, those contracts will typically be binding on the principal. This means that the principal will be liable for acts carried out by the agent which fall within its apparent, actual or express authority.

With this in mind, it is vitally important that the scope and terms of the agency relationship and the authority of the agent are clearly defined.

An agent will of course owe contractual duties to the principal and those will be clearly set out. It is likely that this will include an express term for the agent to act responsibly in performing its duties and with reasonable care and skill (in compliance with the principal’s reasonable instructions).

In addition to the contractual duties, the agent will also owe what are known as fiduciary duties to the principal. Common fiduciary duties include acting honestly, not to make any unauthorised profits from the position as a fiduciary and not to place oneself in a situation where the agent’s own interests may conflict with the those of the principal.

In practice, this means that an agent must do the following:

• Keep an accurate account of all transactions entered into on the principal’s behalf.
• Provide the principal with details of transactions (even after termination).
• Permit the principal to inspect and copy records relating to the agency business affairs.

The duties owed by the principal will also be set out in the agency agreement. Primarily, the principal’s obligation is to pay the agent the agreed commission. Materially, the commission might continue to be payable even if the agent has breached its fiduciary duties to the principal. However, any dishonest breach of a fiduciary duty is likely to result in the commission being forfeit.

We have dealt with may disputes relating to commissions arising from recruitment contracts. In these disputes, the agent must demonstrate that it was the effective cause of the introduction giving rise to the employment placement. Without meeting this burden of proof, the agent will not be entitled to the commission it has claimed.

In addition to paying commission, the principal will also be liable to reimburse the agent for its costs incurred on the principal’s behalf.

Depending upon the circumstances, it is possible that either the principal or the agent can be responsible for actual performance with a third party.

An agent is most likely to be liable where the principal has not been identified to the third party, so it is not clear to the third party that the agent entered into the contract as an agent acting on behalf of a principal.

Terminating an agency agreement is not necessarily straightforward. There will be the consequences of termination to consider. Every agency agreement is either terminated by agreement or by an act of one or other of the parties, the agency agreement is likely to set out any minimum terms and periods of notice events of breach for which the agreement may be terminated and any specific provisions which are likely to apply after notice of termination and termination has taken effect.

In the absence of a written agreement, either party may terminate the agency agreement at any time although reasonable notice may be required in some cases.

If The Commercial Agents (Council Directive) Regulations 1993 apply termination by the principal will normally entitle the agent to a payment, which may be quite substantial.

Although The Commercial Agents (Council Directive) Regulations 1993 derive from European law, they were retained under the European Union (Withdrawal) Act 2018 and are now much a part of law in the UK.

Commercial agents are entitled to minimum periods of notice of termination. These periods of termination include the following:

• One month for the first year of the contract.
• Two months for the second year commenced.
• Three months for the third and subsequent years commenced.

The above notice periods apply by default and cannot be shortened by the agency agreement. Longer periods may be agreed provided that the period of notice is not shorter than that to be given by the agent. Unless otherwise agreed, the end of the notice period must coincide with the end of a calendar month.

The The Commercial Agents (Council Directive) Regulations 1993 also apply where an agency agreement has expired or it has reached the end of its effluxion of time.

However, The Commercial Agents (Council Directive) Regulations 1993 do not trespass on any rule of law which might provide for the immediate termination of an agency agreement in the event of non-performance or breach.

• That said, the 1993 Regulations do not provide a literal right to terminate.
• The purpose of the 1993 Regulations is not to fetter or obstruct the parties in pursuing their common law rights to terminate the agency agreement.
• The sole purpose of the 1993 Regulations is to provide payment on termination or expiry of a commercial agency. This payment usually takes the form of compensation.

Compensation will be calculated by reference to the value of the agency at the date of termination on the assumption that it continued. The value of the agency calculated on the official premise of what the agency earning prospects had been and what people would have been prepared to pay for similar businesses at the time.

Notably, the right to compensation is lost where the agent does not within a year of termination notify the principal that it intends to pursue a claim in respect of that right.

In the context of a sale and purchase agreement, the purchaser will receive various protections in the form of warranties and indemnities which are given by the vendor. Typically, warranties relate to the ownership of the business and assets together with any ancillary matters including financial, regulatory, property, tax, environmental, pensions, commercial, employment and other aspects.

Together, the warranties and indemnities supplement the due diligence exercise undertaken by the purchaser and its advisers before exchange of contracts. Well drafted warranties and indemnities will give the purchaser a legal right to damages for any breach by the vendor if a liability arises which entitles the purchaser to claim under an indemnity.

Warranties will generally cover the most important areas which would be of concern to the buyer of the business or asset.

In particular, care should be taken to draft the warranties with regard to the nature of the business, any group structure, the relevant industry, the level of due diligence undertaken and to cover any other concerns that may have been identified during the buyer’s due diligence.

Once the scope of the warranties is identified, it is important to consider the scope of the remedies that will be available to the buyer in the event of a breach. Typically, the vendor will want to limit the warranty to a claim for damages which itself will be limited; on occasion they may insist upon a right to rescind the agreement in the event of a warranty breach.

At its heart, a warranty is a contractual promise. If a contractual promise is breached, it will give rise to a claim for damages for breach of contract.

Typically, a buyer will also want to incorporate ‘representations’ into a warranty clause in order to exploit the spectrum of damages and remedies available in tort (in addition to contract).  A representation is a statement, relating to a matter of fact or intention, made during the course of contractual negotiations. If the representation in the warranty is untrue and the innocent party has relied upon the representation, this will give rise to a claim in tort for misrepresentation. 

There are important differences in the types of remedies available for breach of contract and tort. However, damages are common to both. The contractual measure of damages will put the injured party in the position it would have been in if the contract had not been performed. In tort, damages are restitutionary in nature and will put the innocent party in the position it would have been in had the tort not been committed. In a warranty claim, the damage is likely to be the difference between the price paid and the actual value of the business or asset. So, whether it is a tortious of the breach of contract claim, the damages are more or less the same.

The relevant date for assessment of damages is likely to be the time of the breach or the misrepresentation. Typically, this is the date upon which the warranties were given.

In addition, in a claim in misrepresentation, ‘recission’ will be available. If a contract is rescinded, it is set aside, and the parties are substantially returned the position they were in before the contract was made. However, recission is not always available and the right to rescind may be lost if it is impossible to return he parties to their original position. In that case, damages will be awarded.

Generally, the scope of consequential damages is wider for a misrepresentation claim than it is for a breach of contract claim, in both instances the court will still need to determine what damages are recoverable by looking at the remoteness of the damage suffered.

For contract claims the claimant will be able to recover the following:

• Losses arising from the normal or ordinary course of things from the breach of contract itself (these are known as direct losses).

• Losses as may reasonably be supposed to have been in the contemplation of the parties at the time they made the contract (these are known as indirect losses).

In a misrepresentation claim, the damage must be reasonably foreseeable. Typically, this means a person could or should reasonably have foreseen the damage or harm.

The first step in resolving a contract dispute is to thoroughly review the contract itself. Our team will help you do this. This involves:

• Identifying relevant clauses. Carefully examine the contract to identify the clauses related to the dispute. This includes understanding obligations, rights, and remedies outlined in the contract.
• Understanding terms and conditions. Pay close attention to the specific terms and conditions, definitions, and any special provisions or exceptions that may apply.
• Checking for breach clauses. Look for any clauses that specifically address breaches of contract, including what constitutes a breach and the remedies available.
• Assessing dispute resolution clauses. Determine if there are any predefined methods for resolving disputes, such as mediation, arbitration, or negotiation, that must be followed before pursuing litigation.

By thoroughly reviewing the contract, you can clarify the obligations and rights of each party, identify any breaches, and understand the mechanisms available for resolving the dispute.

The next step involves gathering and analysing all relevant evidence to support your position in the dispute. This includes:

• Documenting communications. Collect all written communications related to the contract, including emails, letters, and messages that may provide context or evidence of the dispute.
• Gathering transaction records. Compile records of transactions, payments, deliveries, or services provided under the contract to establish a timeline and evidence of performance or non-performance.
• Reviewing performance records. Obtain records that document the quality and timeliness of performance, such as inspection reports, quality control documents, and performance metrics.
• Witness statements. Gather statements from witnesses who can corroborate your claims or provide additional insights into the circumstances surrounding the dispute.

Analysing and organising this evidence is crucial for building a strong case and effectively demonstrating the merits of your position in the dispute. Our legal experts are on hand to help with this.

Seeking legal advice is a critical step in the dispute resolution process. Our experienced lawyers can provide:

• Case assessment. A thorough assessment of your case, including the strengths and weaknesses of your position, potential legal remedies, and the likelihood of success.
• Strategy development. Development of a strategic approach to resolving the dispute, whether through negotiation, mediation, arbitration, or litigation.
• Negotiation assistance. Assistance in negotiating a settlement with the other party, including drafting settlement agreements and ensuring that your interests are protected.
• Representation in ADR and litigation. Representation in alternative dispute resolution processes and, if necessary, in court proceedings to pursue or defend against a claim.
• Advise on legal costs and funding. Whichever side of the dispute you are on, you need to know your potential exposure in terms of legal costs. We always offer clear and transparent advice on this.

Alternative Dispute Resolution offers numerous advantages over traditional court proceedings, including:

• Cost-effectiveness. ADR services are generally less expensive than litigation, reducing the financial burden on you.
• Time-saving. ADR can significantly shorten the time needed to resolve disputes compared to the often lengthy court process.
• Confidentiality. ADR proceedings are typically private, helping to maintain confidentiality and protect your reputation.
• Flexibility. ADR allows us to design procedures and solutions that best meet your specific needs and interests.
• Preservation of relationships. Our ADR methods, such as mediation, focus on collaboration and can help preserve professional and business relationships if this is what you want.

There are several types of Alternative Dispute Resolution, each with its unique processes and benefits. Our team can guide you through the most appropriate method for your situation.

Mediation: process and benefits

Process. Mediation involves a neutral third party, known as a mediator, who facilitates discussions between the disputing parties to help them reach a mutually acceptable agreement. The mediator does not impose a decision but assists the parties in understanding each other’s perspectives and finding common ground.

Benefits.

• Voluntary and non-binding. You retain control over the outcome, as any agreement reached is mutually agreed upon and can be non-binding until formalised.
• Collaborative environment. Mediation encourages open communication and cooperation, which can lead to more amicable solutions.
• Flexible solutions. The flexible nature of mediation allows for creative and tailored resolutions that might not be available through litigation.

Arbitration: process and benefits

Process. Arbitration involves a neutral third party or panel, known as an arbitrator or arbitral tribunal, who hears the evidence and arguments from both parties and then makes a binding decision. The process is similar to court proceedings but is usually less formal and more streamlined.

Benefits.

• Binding decisions. The arbitrator’s decision is final and enforceable, providing certainty and closure for the parties involved.
• Expertise. Arbitrators are often chosen for their expertise in the relevant field, which can lead to more informed and appropriate decisions.
• Efficiency. Arbitration can be faster and more efficient than court proceedings, with simplified procedures and reduced bureaucracy.

Effective preparation is crucial for success in Alternative Dispute Resolution. Our team can assist you with the following steps:

• Understanding the process. We will help you familiarise yourself with the specific ADR method being used, whether mediation or arbitration, to know what to expect and how to participate effectively.
• Gathering evidence. Our team will assist in compiling all relevant documents, communications, and other evidence that supports your position. We will organise these materials for easy reference during the ADR process.
• Identifying key objectives. We will help you clearly define your goals and what you hope to achieve through ADR. Understanding your priorities can guide your strategy and negotiations.
• Selecting the right neutral party. We will assist in choosing a mediator or arbitrator with the appropriate expertise and experience to handle your dispute effectively.
• Preparing your case. Our lawyers will develop a clear and concise presentation of your case, including key arguments, evidence, and possible solutions. We will help you practice articulating your position to ensure clarity and persuasiveness.
• Considering settlement options. We encourage you to be open to potential compromises and settlements that may arise during the ADR process. Flexibility can often lead to more satisfactory outcomes for all parties involved.

By understanding the benefits, processes, and preparation steps for ADR, our team can help you resolve disputes in a manner that saves time, reduces costs, and preserves relationships.

Effective preparation is key to a successful litigation outcome. Our expert team will assist you with:

• Understanding the Case. We will thoroughly review the facts and evidence of your case, identifying strengths and weaknesses, and advising on the best legal strategies.
• Documentation. Gathering and organising all relevant documents, contracts, communications, and evidence to support your claim or defence. This includes preparing witness statements and expert reports if necessary.
• Compliance with Pre-action Protocols. Ensuring that all pre-action protocols are followed, such as sending a letter before action to the other party, which outlines the basis of the claim and the desired resolution.
• Legal Research. Conducting legal research required to support your case, including reviewing relevant laws, precedents, and legal principles that apply.

Our commercial litigation team will guide you through each stage of the litigation process, providing clear explanations and support:

• Issuing proceedings. If you are a Claimant and the dispute cannot be resolved through pre-action negotiations, we will assist you in issuing legal proceedings. This involves filing a claim form and particulars of claim with the court.
• Serving documents. Ensuring that all necessary documents are properly served on the other party, in accordance with legal requirements.
• Defence. We can either help draft a defence or review one which is served.
• Case Management. Handling all aspects of case management, including compliance with court directions, preparation of court bundles, and liaising with the court and the other party’s legal representatives.
• Disclosure and evidence. Managing the disclosure process, where each party is required to exchange relevant documents. We will also prepare and present evidence to support your case, including witness statements and expert evidence.
• Interim applications. Handling any interim applications that may arise, such as applications for summary judgment.
• Trial preparation. Assisting with all aspects of trial preparation, including briefing counsel, preparing opening and closing statements, and organising witness attendance.
• The trial. Representing you at trial, ensuring that your case is presented effectively and advocating on your behalf.

We understand that funding litigation can be a significant concern. Our team can provide comprehensive advice on funding options to ensure that you can pursue your legal rights without undue financial burden. Here are some key options we offer, as detailed on our funding for legal claims page:

1. Conditional Fee Agreements (CFAs).

Also known as “no win, no fee” agreements, where our fees are only payable if your case is successful.

2. After the Event (ATE) Insurance.

Insurance that covers legal costs and expenses in the event that your claim is unsuccessful, providing financial protection against adverse costs.

3. Third-party funding.

Arrangements where a third-party funder provides financial support for your case in exchange for a share of any damages awarded.

4. Legal expenses Insurance.

Coverage that may be included in existing insurance policies, such as home or business insurance, which can help cover the costs of legal proceedings.

5. Fixed fees and hourly rates.

Transparent pricing structures, offering either fixed fees for specific tasks or hourly rates, ensuring you are fully aware of potential costs.

Our goal is to provide you with clear, transparent advice on the most suitable funding options for your circumstances, allowing you to focus on your case with confidence.

The main types of damages are set out below

1. Compensatory damages.

These aim to cover the loss incurred by the non-breaching party, putting them in the position they would have been if the contract had been performed.

This includes direct losses such as

• the cost of obtaining substitute performance and
• indirect losses like lost profits.

Compensatory damages are the most common form of damages awarded in breach of contract cases and are designed to make the injured party whole.

2. Punitive damages.

These are awarded to punish the breaching party for particularly egregious behaviour and to deter similar conduct in the future. While punitive damages are rare in contract cases, they may be awarded in situations involving fraud, malice, or wilful misconduct.

The purpose of punitive damages is not to compensate the injured party but to penalise the wrongdoer and set an example.

3. Nominal damages.

These are small sums awarded when a breach occurred, but the non-breaching party did not suffer a significant loss.

Nominal damages acknowledge that a legal wrong has occurred even if there was no substantial harm. They serve as a symbolic recognition of the breach and can help establish a precedent or clarify legal rights.

4. Liquidated damages.

These are pre-determined amounts specified in the contract, payable in the event of a breach.

Liquidated damages are agreed upon by the parties during the formation of the contract and are intended to provide certainty and avoid litigation over the amount of damages. They are enforceable if they represent a reasonable estimate of the likely damages at the time the contract was made.

The following factors are used when calculating damages

• Direct losses. The actual financial loss directly resulting from the breach, such as costs incurred to replace goods or services. These are the most straightforward to calculate and usually form the basis of compensatory damages.

• Consequential losses. Additional losses that are a consequence of the breach, such as lost profits, business disruption, or damage to reputation. These losses must be foreseeable at the time the contract was made and are often more complex to prove and quantify.

• Mitigation of loss. The non-breaching party’s duty to take reasonable steps to minimise their losses. If the injured party fails to mitigate, their recoverable damages may be reduced. This involves taking appropriate actions to avoid or reduce the impact of the breach, such as finding a substitute supplier or service provider.

The following steps need to be taken when making a damages claim

1. Identify the breach.

Clearly identify and document the breach of contract, specifying how the other party has failed to meet their obligations. This may involve reviewing contract terms, communications, and performance records.

2. Calculate the losses.

Assess and quantify the financial losses incurred due to the breach. This involves detailed accounting of direct and consequential losses, as well as any costs associated with mitigation efforts.

3. Gather evidence.

Collect all relevant documentation and evidence to support the claim for damages. This includes contracts, invoices, correspondence, witness statements, and any other relevant records.

4. Notify the breaching party.

Inform the breaching party of the breach and the intention to claim damages. This should be done formally, usually through a letter of demand or a notice of breach, outlining the breach and the damages sought.

5. Seeking legal advice.

Consulting with our legal team means you can evaluate the claim and determine the best course of action. Our team will assess the strength of the case, prepare documentation, and advise on negotiation or litigation strategies.

6. Issuing a claim.

If necessary, commence legal proceedings to formally claim the damages. This involves filing a Claim Form in the appropriate court, presenting the evidence, and ultimately going to trial if the case cannot be settled.

Our team of experienced lawyers can provide:

• Case assessment. Evaluating the strength of your claim and the potential damages recoverable. We will review the facts, evidence, and applicable law to provide a clear assessment of your case.
• Strategic guidance. Advising on the best approach to pursue the claim, whether through negotiation, mediation, or litigation. Our lawyers will develop a tailored strategy to achieve the best possible outcome for your situation.
• Documentation and evidence. Assisting in gathering and organising evidence to support the claim. We will help you compile and present the necessary documentation to build a strong case.
• Representation. Representing you in negotiations and court proceedings to ensure your interests are protected. Our team will advocate on your behalf, seeking to secure the maximum possible damages.

Example 1.

A supplier fails to deliver goods on time, causing the buyer to lose a major sale. The buyer claims compensatory damages for the lost profits and additional costs incurred. This involves proving the direct link between the breach and the lost sale, as well as quantifying the financial impact.

Example 2.

A contractor breaches a confidentiality agreement, leading to a loss of competitive advantage. The injured party seeks nominal damages as a recognition of the breach. While the financial loss may be minimal, nominal damages serve to acknowledge the breach and reinforce the importance of confidentiality.

Example 3.

A party defaults on a construction contract, and the contract specifies liquidated damages for delays. The non-breaching party claims the liquidated damages as outlined in the contract. This provides a clear and enforceable measure of damages, avoiding the need for lengthy litigation over the amount.

By understanding the types of damages, the calculation process, and the steps involved in claiming damages, you can effectively pursue compensation for breaches of contract. Our expert legal team is here to provide the guidance and support you need to achieve a favourable outcome.

What types of damages can be claimed in a breach of contract?

In a breach of contract, the types of damages that can be claimed include

• compensatory damages,
• punitive damages,
• nominal damages, and
• liquidated damages.

Compensatory damages cover actual losses suffered, while punitive damages are awarded to punish wrongful behaviour. Nominal damages recognise the breach without significant loss, and liquidated damages are pre-agreed amounts specified in the contract.

How are compensatory damages calculated?

Compensatory damages are calculated based on the actual losses incurred due to the breach. This includes direct losses, such as the cost of obtaining substitute performance, and consequential losses, such as lost profits. The goal is to put the non-breaching party in the position they would have been in if the contract had been performed as agreed.

What is the difference between liquidated and unliquidated damages?

Liquidated damages are predetermined amounts specified in the contract, payable in the event of a breach. They are agreed upon at the time of contract formation and are enforceable if they represent a reasonable estimate of likely damages. Unliquidated damages, on the other hand, are not pre-agreed and must be assessed and quantified by the court based on the actual harm suffered.

Can I claim for consequential losses?

Yes, you can claim for consequential losses if they are a direct result of the breach and were foreseeable at the time the contract was made. Consequential losses can include lost profits, business disruption, and additional expenses incurred due to the breach.

What are nominal damages?

Nominal damages are small sums awarded when a breach of contract has occurred, but the non-breaching party has not suffered significant financial loss. These damages serve as a symbolic recognition of the breach and can help establish legal precedent or clarify rights.

How can I prove the amount of damages?

To prove the amount of damages, you need to provide clear and convincing evidence of the financial losses incurred due to the breach. This includes documentation such as contracts, invoices, receipts, correspondence, and witness statements. Detailed records and expert testimony can also support your claim.

What does mitigation of loss mean?

Mitigation of loss refers to the duty of the non-breaching party to take reasonable steps to minimise the losses resulting from the breach. This means seeking alternative sources, reducing expenses, or otherwise mitigating the impact of the breach. Failure to mitigate can reduce the amount of recoverable damages.

How long do I have to claim damages for breach of contract?

The time limit for claiming damages for breach of contract varies depending on the jurisdiction and the specific terms of the contract. In the UK, the limitation period is generally six years from the date of the breach, but it can vary for certain types of contracts or if specified otherwise in the contract.

Can I claim damages for emotional distress?

Damages for emotional distress are generally not recoverable in breach of contract cases unless the contract specifically includes provisions for such damages, or the breach involves a personal matter that inherently causes emotional distress. These cases are rare and typically require strong supporting evidence.

What happens if the damages are more than the contract value?

If the damages exceed the contract value, the non-breaching party can still claim the full extent of their losses. However, the ability to recover such damages depends on the nature of the breach, the foreseeability of the damages, and the specific terms of the contract. Courts will assess whether the claimed damages are reasonable and justified.

Can I claim interest on unpaid damages?

Yes, you can claim interest on unpaid damages in the UK. The interest can be claimed from the date of the breach until the date of payment. The rate of interest may be specified in the contract or determined by statutory provisions, such as the Late Payment of Commercial Debts (Interest) Act 1998.

How do courts determine if damages are foreseeable?

Courts determine if damages are foreseeable based on the principle established in Hadley v. Baxendale. Damages are considered foreseeable if they arise naturally from the breach or were within the contemplation of both parties at the time the contract was made. This means the breaching party should have known that such damages would likely result from their breach.

Are there any limits to claiming consequential damages?

Yes, there are limits to claiming consequential damages. The claimant must prove that the consequential damages were foreseeable and directly resulted from the breach. Additionally, the claimant must have taken reasonable steps to mitigate their losses. Courts will also consider whether the amount claimed is reasonable and proportionate to the breach.

Can damages be claimed for a breach of a verbal contract?

Yes, damages can be claimed for a breach of a verbal contract, provided there is sufficient evidence to prove the contract’s existence and terms. Evidence may include witness testimonies, written communications, and any conduct indicating an agreement. However, written contracts are generally preferred as they provide clearer proof of the agreement and its terms.

What happens if both parties breach the contract?

If both parties breach the contract, the court will assess the relative faults and contributions to the breach. Each party may be entitled to damages for the losses they suffered due to the other’s breach. In some cases, the breaches may offset each other, and the court may adjust the damages awarded accordingly. Courts will also consider any contributory negligence and the overall fairness of the outcome.

Below are our top 10 tips to minimise the chances of business & contract disputes in the future

1. Importance of clear communication

Clear and transparent communication between all parties is essential to prevent misunderstandings and ensure that everyone is on the same page regarding contractual obligations. Regular updates and open channels for discussing potential issues can mitigate conflicts before they escalate.

2. Regular contract reviews

Conducting regular reviews of contracts helps identify and address potential issues early. This includes checking for compliance with terms, updating clauses to reflect current practices, and ensuring that all parties continue to meet their obligations.

3. Staff training

Training staff on contract management and dispute resolution processes is vital. Well-informed employees are better equipped to handle contract-related issues proactively, reducing the likelihood of disputes.

4. Quickly seeking legal advice

Consulting with legal advisers during contract drafting, negotiation, and execution stages can help ensure that the terms are clear, fair, and legally enforceable. Our legal experts can provide guidance on mitigating risks and handling potential breaches.

5. Conduct risk management assessments

Regular risk management assessments help identify potential areas of concern in contracts and business operations. By evaluating risks and implementing strategies to mitigate them, businesses can reduce the likelihood of disputes.

6. Maintain visibility in supply chains

Ensuring visibility and transparency throughout the supply chain can prevent disputes related to delivery, quality, and compliance. Regular audits, clear communication, and effective monitoring systems are essential components of supply chain management.

7. Implement contingency plans

Having contingency plans in place for potential contract breaches or other disruptions can help businesses respond effectively and minimise losses. These plans should outline steps to take in various scenarios, ensuring a swift and organised response.

8. Ensure you have proper documentation

Maintaining thorough and accurate documentation of all contract-related activities, communications, and transactions is crucial. Proper documentation provides evidence and supports your position in the event of a dispute. You are obliged to retain all this information as part of your disclosure obligations if legal proceedings look likely.

9. Adhere to dispute resolution clauses

Incorporating and adhering to dispute resolution clauses in contracts can facilitate the resolution of conflicts without resorting to litigation. These clauses may include mediation, arbitration, or other alternative dispute resolution methods.

10. Consider escalation clauses

Escalation clauses provide a structured process for resolving disputes by escalating the issue to higher levels of management or external mediators. This helps ensure that disputes are addressed promptly and effectively before they escalate further.

By implementing these strategies, businesses can significantly reduce the risk of contract disputes and maintain positive, productive relationships with their partners and clients. Our team at Francis Wilks & Jones is here to provide expert guidance and support in all aspects of contract management and dispute prevention.

Our team at Francis Wilks & Jones has handled numerous contract disputes, each unique in its challenges and solutions. For example, we successfully assisted a client in a major contract dispute with a supplier who failed to deliver goods on time, resulting in significant business losses. We navigated the legal complexities to secure a favourable settlement, ensuring our client was compensated for their losses and could continue their operations smoothly.

From our extensive experience, we’ve learned that early intervention and clear documentation are crucial in resolving contract disputes effectively. For instance, in a case involving a breach of confidentiality, our proactive approach in gathering comprehensive evidence and our strategic negotiation skills led to a swift and satisfactory resolution. This case underscored the importance of maintaining detailed records and the benefits of seeking expert legal advice early in the dispute process.

We pride ourselves on our track record of success. One of our notable success stories involves representing a small business in a complex breach of contract claim. Our diligent preparation and expert legal strategies resulted in a significant damages award for our client. This not only compensated for their financial losses but also restored their confidence in the legal process. Testimonials from our satisfied clients highlight our commitment to delivering exceptional results and personalised service.

Read our client testimonials here.

Choosing Francis Wilks & Jones means partnering with a team of dedicated legal professionals who are committed to your success. Our expertise in contract law, combined with our client-focused approach, ensures that you receive tailored solutions that meet your specific needs. We offer:

• Expertise. Our team comprises experienced lawyers with deep knowledge in contract disputes and commercial litigation.
• Client-centric approach. We prioritise your needs and work closely with you to understand your goals and challenges.
• Proven track record. Our history of successful case outcomes and satisfied clients speaks to our ability to deliver results.
• Comprehensive services. From initial consultation to final resolution, we provide end-to-end legal support, ensuring you are informed and confident at every stage.

Our legal experts at Francis Wilks & Jones offer valuable tips for managing contract disputes:

• Maintain detailed records. Keeping thorough documentation of all contract-related activities can provide critical evidence in case of a dispute.
• Seek early legal advice. Consulting with a legal expert at the first sign of a dispute can help you understand your rights and options, potentially preventing escalation.
• Communicate clearly. Ensuring clear and open communication with all parties can help resolve misunderstandings and prevent disputes from arising.

Avoiding common pitfalls can save time and resources. Some pitfalls include:

• Ignoring early signs of dispute. Failing to address early indications of a dispute can lead to more significant issues. It’s important to act quickly and seek legal advice.
• Inadequate contract terms. Vague or incomplete contract terms can lead to disputes. Ensuring that contracts are clear, comprehensive, and legally sound can prevent misunderstandings.
• Failure to mitigate losses. Not taking steps to minimise losses after a breach can reduce recoverable damages. Proactively mitigating losses is crucial.

Implementing best practices can enhance your ability to manage contract disputes effectively:

• Regular contract reviews. Periodically reviewing contracts helps ensure compliance and identifies potential issues early.
• Risk management. Conducting risk assessments and implementing mitigation strategies can reduce the likelihood of disputes.
• Training and awareness. Educating staff about contract management and dispute resolution processes can improve overall efficiency and reduce risks.

By choosing Francis Wilks & Jones, you benefit from our expertise, client-focused approach, and proven track record of success. We are dedicated to providing you with the highest level of legal support to navigate and resolve contract disputes effectively.

Yes, you can claim compensation for breach of contract. Compensation aims to cover the financial losses incurred due to the breach, including direct and consequential damages. The amount of compensation depends on the specifics of the breach and the losses suffered.

A breach of contract claim is a legal action taken by one party against another for failing to fulfil their contractual obligations. The claimant seeks remedies, which may include damages, specific performance, or contract termination.

The four elements required in a breach of contract claim are:

1. Existence of a valid contract. There must be a legally binding agreement between the parties.
2. Performance by the Claimant. The claimant must have fulfilled their contractual obligations.
3. Breach by the Defendant. The defendant must have failed to perform their obligations.
4. Damages. The claimant must have suffered a loss due to the breach.

For a breach of contract, you can receive compensatory damages, punitive damages (in rare cases), nominal damages, or liquidated damages. Additionally, remedies may include specific performance or contract rescission, depending on the nature of the breach.

Proving a breach of contract can be challenging, depending on the complexity of the contract and the nature of the breach. Clear evidence of the contract terms, performance, and breach, as well as the resulting damages, is essential for a successful claim.

To win a breach of contract claim, you must provide clear evidence of the contract, demonstrate your performance, prove the other party’s breach, and show the damages you incurred. Strong legal representation and thorough documentation are crucial. Our team is here to help.

Defending a breach of contract claim involves challenging the validity of the contract, showing that you fulfilled your obligations, demonstrating that no breach occurred, or arguing that the claimant did not suffer damages. Proving that the breach was due to circumstances beyond your control (force majeure) can also be a defence.

The burden of proof for breach of contract lies with the claimant, who must demonstrate that the contract existed, they performed their obligations, the defendant breached the contract, and they suffered damages as a result. The standard of proof is “balance of probabilities,” meaning it is more likely than not that the breach occurred.

The most common breach of contract is non-payment, where one party fails to pay for goods or services as agreed. Other frequent breaches include failure to deliver goods or services, delivering substandard goods or services, and late performance.

The penalty for breach of contract typically involves paying damages to the non-breaching party. The amount and type of damages depend on the nature of the breach and the losses incurred. In some cases, the contract may specify liquidated damages or other penalties.

In some cases, a breach of contract can be remedied by the breaching party fulfilling their obligations or compensating the non-breaching party. This may involve repairing defective work, delivering missing goods, or making a financial settlement. The possibility of fixing a breach depends on the terms of the contract and the nature of the breach.